Category Archives: Product Management

Reverse Logistics Tips from World Trade Magazine

A recent article in World Trade Magazine, “Reverse Logistics: Money Tree or Money Pit?”, had some good suggestions on how to streamline your reverse logistics supply chain to reduce costs and increase customer satisfaction. Quoting a recent study from the Aberdeen Group that found that best-in-class firms reduce return times by over 75%, increase customer satisfaction by 15%, and reduce repair costs by 10%, the article noted that companies best-in-class in reverse logistics have a few things in common.

  1. Standardized Return & Repair Processhodge-podge processes drive up costs
  2. Ability to Recover Costs from Suppliersa contract that allows for the recovery of costs is one thing, the ability to recover those costs is something else
  3. Real-Time Information Retrievalwhen a customer calls, it is imperative to be able to provide them with an update on their return status
  4. Multi-Channel Visibilityreturns can be initiated in the store, on the website, or over the phone, and can be shipped from the store, a reseller, or the home

This leads to the following best practices:

Multi-Channel Visibility

Customers expect a seamless experience. The ability to return an item ordered online to a store or an item bought at a store over the phone if the store is far away is critical. This requires the returns system to be integrated across all of the channels.

Centralized Returns Facility

Reverse logistics goes more smoothly through a dedicated facility which is set up to allow for sorting, testing, repackaging, and shipping of goods to repair centres or supplier distribution centres. These facilities can provide a way of visually identifying common problems quickly and efficiently. Consider the example of the weed whacker manufacturer who was able to identity the reason for a 266% increase in returns by noticing that the switches were white instead of blue, which was the colour of the approved switch.

Quick Problem Identification

Considering that 70% of goods returned as defective actually work, it’s imperative to quickly determine which goods are truly defective and need to go to the repair centre and which goods can be repacked for resale. In addition, with many of today’s products being (built-in) battery powered, many times the problem is just a bad battery, and the repair is as simple as swapping out a defective battery for a good one — something that can be done in the returns depot, saving an expensive return to the repair centre.

Since even the best efforts to improve quality won’t eliminate defects entirely, and since customers will continue to return products that aren’t really defective (or that just need a new battery), it’s important to have a streamlined reverse logistics process to ensure customer satisfaction stays high while costs stay low.

Does Your CSM System Provide Multiple Product Views?

A recent white paper by Dassault Systemes on Product Lifecycle Management (PLM) hit the nail on the head when it asked, near the back of the paper, if your Component Supplier Management system supported multiple views? Specifically, the paper on “Component Supplier Management” (CSM) identified three views that your PLM / CSM system has to support if you want it to be adopted across the organization and utilized across the product lifecycle:

  • system (logical)to enable distributed and cross-organization design activities
  • physical (EBOM: engineering bill-of-materal)to enable component identification, selection, and standardization
  • financial (BOM: manufacturing bill-of-analysis)to enble supplier identification, selection, management and (strategic) sourcing activities

The reality is that PLM is a very involved process that not only touches most of the orgnization, but impacts most of the organizational functions. As a result, it needs to either support most of those functions or capture the data required by those functions and/or integrate with other organizational systems that capture the necessary data and/or accomplish the relevant functions in order to be useful, because PLM is not a function that can be siloed into any one organization. Keep this in mind when selecting your next PLM system.

Quality DOES NOT Equal Risk Management

Every now and again I see a headline that causes me to foam at the mouth. One of the most recent examples is a recent article in Industry Week titled “Quality Equals Risk Management”. While I’m generally a fan of this publication, I can’t stand it when a headline makes such an erroneous claim.

Quality is a by-product of proper Risk Management. Quality Control is an aspect of proper Risk Management. But even Quality Control does not equal Risk Management! Risk Management is a broad initiative that looks at, and attempts to mitigate, all of the risks in your physical, financial, and information supply chains. This includes managing financial risks around currency exchange, commodity prices, and economic instability. Environmental risks around natural disasters, climate change, and accidents involving hazardous materials. Political risks involving terrorism, the proliferation of Weapons of Mass Destruction (WMDs), failing states, and crime. Compliance and Regulatory risks stemming from globalization, expansion and restriction of trade, and regional instability. Workforce risks from infectious and chronic diseases, pandemics, and liability regimes. And other product risks from lack of raw materials, transportation breakdowns, and theft. Quality is just one aspect of risk — and quality control is just one aspect of risk management!

All quality suggests is that you have good quality control programs in place — but it doesn’t even guarantee that! It might mean you have a high quality supplier who takes pride in their work and goes the extra mile to insure quality despite your shoddy practices. And while the article is right in that quality is the most powerful when it is engaged to prevent defects instead of detecting them after the fact, it is still only one aspect of a well rounded risk management program.

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For True Innovation …

Ditch the budget. First of all, as per this Financial Times article, there is no correlation between R&D spend and innovation success. Secondly, as per a recent Harvard Business Review blog post on “get your team out of the innovation lull”, fixing an innovation budget puts your people into a mindset that their innovation is limited to the budget they have. Third, and most important, while you can budget the cost of product development (based on what the market is expected to bear), you can’t budget the cost of innovation. That relies as much on inspiration as it does perspiration.

Plus, and this is key, you can’t “innovate” a new product until you know what is, and is not, doable. That’s why it’s ridiculous to tie the research and development budgets together. They should be separate. While the two units should come together regularly to collaborate on research directions (i.e. “this is what we’d like to build, what’s possible”) and product directions (i.e. “this is what we’ve [sort-of] figured out, what do you think you can use and sell, and we’ll focus on improving that”), research should be free from distracting day-to-day product development, market, and associated budget constraints so they can focus on figuring out what can be done and, once development has identified certain capabilities as currently marketable, how (cost) efficiently it can be done.

Now, I’m not saying Research shouldn’t have a budget, as it should, but that budget should be at the department level, and not the researcher / research project level, and it should be up to the director(s) to figure out how best to allocate it on an on-going basis. For instance, if a team requests a purchase of a new piece of hardware that would be generally applicable to multiple research projects, then even if it exceeds the typical hardware investment, the director(s) can choose to allow the purchase and then spend less elsewhere. But if a certain costly request would not be generally applicable, the director(s) can choose to deny the request and urge the investigator(s) to innovate a more cost effective way to obtain what is needed for an experiment or investigation. In other words, we need to return to the innovation lab model, where productive researchers and true innovators aren’t spending all their time worrying about budgets … because when you’re worrying about budgets, you’re not getting anything done. GE understood that, and that’s why they did so well for so many years. Not only did they give their top people the budgets they needed to be effective, but they paid also paid their top people very well so they wouldn’t have to worry about money in their personal life. While “what can we do for 20% less” is inspiring, nothing kills an innovation mindset faster than if the team is constantly stressed about money.

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There’s Opportunity in Global R&D …

… but there’s also risk as well. In fact, I’d say the risk is as big as the opportunity presented in this Global Services article on the “globalization of R&D and Product Development” which claims that there is a tremendous opportunity for growth based on the fact that only 5% of current R&D spend is based on outsourced partnerships.

While it is true that the average small to mid-sized software product company will continue to be faced with cost pressures and increased revenue expectations, that headcount in other economies like China, India, Poland, and Russia are considerably cheaper, and that a few of these countries are as likely to produce as least as many software geniuses as North America, it’s also true that there are disadvantages and risks to outsourcing. The first is market risk. Does the outsourced R&D provider’s team truly understand the market needs? The second is education. The educational systems in these countries traditionally pump out some of the world’s greatest mathematicians, but mathematicians (and pure mathematicians in particular) are often the world’s worst coders. They can come up with the most brilliant algorithms on the planet, and maybe even code an initial version of them, but good luck integrating and maintaining their code as part of your code base — because no one but them will be able to understand it, ever.

Then there’s the ever-present culture risk. Will your North American or Western European or Australian team be able to work with them to produce great results, or will they continually misunderstand each other? Then there’s the performance risk. You might get the hardest, best trained worker, or you might get the ultimate slacker who’s there because his father, brother, or uncle is in management or has a strong say over who is hired. Arun Krishnan of Cutting Chai didn’t address outsourcing and how to threaten your outsourced employees, by telling them “I will single out every one of you and kill you”, in Hindi in his first “Learn Hindi from Bollywood Movies” podcast just to be humorous. If you’re unlucky with your hires, you really will want to yell that!

Finally, there’s the cost risk. The only way to insure success is to build a relationship and understanding with the outsourced team, work closely with them, and manage the integrated team on a regular basis. This will require regular trips to their location to find the team, train the team, and manage the team, and then multiple trips for your employees who will have to take turns visiting each location to build the camaraderie required for them to truly work as a team. Early on, this will likely cost a lot more than you budget for.

Now, I’m not against the globalization of R&D, and, especially if you’re a multi-national, I think it’s a great idea, but it has to be done right, and you have to move slow at first. Otherwise, like many companies that don’t properly plan and rush right in, you’ll see nothing for your efforts but huge losses.

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